The independent auditor's report for the year ended 30 September 2017 contains a material uncertainty paragraph in respect of going concern. An extract taken from the text of the auditor's opinion is set out below in part 1 of the notes to this announcement.

Anthony Sanders, Interim Chief Executive and Chairman, commented:

“The last financial year has been a challenging one for the Group. The year saw a shift in the Group’s management and its strategic focus. Since September 2017, we have set about streamlining our operations and revising our strategy to bring increased focus to the business. We are now in a position to prioritise our resources on products and services that utilise blockchain technology in the digital media and fintech markets and ignite the commercial potential that exists within the Group. We would like to thank our shareholders for their continued support.”

CHAIRMAN’S STATEMENT

To our valued shareholders

The last financial year has been a challenging one for the Group and we would like to thank our shareholders for their continued support.

The year saw a shift in the Group’s management and its strategic focus. As Interim Chief Executive Officer, it has been my responsibility to ensure these changes have transitioned smoothly. Since September 2017, we have set about streamlining our operations and revising our strategy to bring increased focus to the business. We are now in a position to prioritise our resources on products and services that utilise blockchain technology in the digital media and fintech markets and ignite the commercial potential that exists within the Group.

Transitioning and management changes

In September 2017, Deborah White resigned from her position as Chief Executive Officer after nine years with the Group. Deborah guided the Group through extensive changes and developments, overseeing our transformation from analogue broadcasting to providing digital and technology solutions. I have been appointed as Interim Chief Executive Officer following seven years on the Board as Technical and Development Director. We thank Deborah for all of her efforts and wish her every success in the future.

Also in September 2017, and with a view to building a suitable sales and marketing team, we appointed Edward “Guy” Meyer as Business Development Director. Guy brings a wealth of experience leading teams across traditional and digital media, and is the ideal person to lead our sales and marketing effort as we look to develop new revenues from our blockchain-based services.

Streamlining operations

Change provides an opportunity for reflection and growth. We have, therefore, taken time since September 2017 to review our operations, to create unity within our services, to reduce spending and to channel costs into areas of the business that align with our revised strategy.

As such, since the period end, we have ceased a number of services that were centred on delivering social good. These include the Passion Project, Alchemy, Winning in the Game of Life, and the Milestone Foundation. We also terminated our membership of the Social Stock Exchange.

Furthermore, and in light of their inability to deliver satisfactory results, we decided to cancel a number of other agreements and contracts. These include: those involving the Milestone Foundation and Passion Project; the cloud-based virtual banking and pre-paid card agreement with two London-based finance and investment companies announced in April 2016; the agreement with an Indian-focused money transfer and pre-paid card group announced in November 2016; and, a payroll contract with a UK-based entertainment payroll specialist announced in October 2016.

Our evaluation of the business determined that a number of these opportunities had failed to deliver satisfactory results in a reasonable timespan owing to poor internal and external execution. We are confident that, with our renewed focus, we will avoid such issues in future.

Fine-tuning our business model

Since the period end, in December 2017, we negotiated a software licensing agreement with Envoy Group Corp, subject to Shareholder approval. This grants us an exclusive sublicense for updated versions of previously announced products, including Backstage HD, MusicRoo, Black Cactus Music, card programmes and KYC products, and enables us to use the Black Cactus Global Blockchain platform to build bespoke solutions whilst developing our own IP.

In February 2018, we signed a memorandum of understanding to enter into a joint venture (Trust In Media Ltd) with Seed Media Ltd and Martin Heath, specifically to develop GDPR compliant payment and IP protection solutions for the music industry, utilising both private and public blockchain technology. The joint venture will augment our music and media publishing capabilities.

These developments form the first steps of our revised strategy, providing the ability to market ready-made products and ensuring we can utilise this disruptive technology to create new products for the digital media and fintech markets going forward. We look forward to expanding our portfolio of products and services, while aiming to work with best-of-breed strategic partners.

In other business areas, the revenues for the resource management and reporting platforms, OnSide and OnGuard continue to grow, with all current clients renewing or expanding their agreements both during and post period. This area of the business will receive increased marketing exposure to take advantage of forthcoming GDPR legislation given the products’ ability to validate individuals and access to data. Disorder Magazine continues to flourish under the media publishing division, and we are also exploring a number of opportunities to monetise content produced.

Working capital, fund raisings and other matters

During the year, the Company issued 994,770,335 new ordinary shares for a total consideration of £3,862,421, of which £2,516,220 was received in cash during the year, £37,500 was received in cash prior to the previous year end (held within the shares to be issued reserve), £58,701 was in exchange for goods and services, and, as announced in November 2016, £1.25m was not received. As announced in January 2018, the Board has reached a settlement with the counterparty, which included them waiving the rights to the shares. It is now the Company’s intention to dispose of the shares in due course. Since the year-end, the Company has issued 30,000,000 new ordinary shares following a shareholder exercising their warrants and raising £150,000 in cash.

The Company continues to carefully manage its working capital position while the changes in strategy take effect and will need to raise further monies through subscriptions for new shares in the short term. The Company remains firmly focused on generating revenue through developing its activities. Protecting the interest of the Company’s shareholders is a priority and the Board’s strategy is to seek to raise funds on a basis that is fair to all.

Results for the year

Despite the Group’s net loss for the year of £2,257,524 (2016: £1,667,270) and revenues of £29,395 (2016: £71,359), of which £4,755 (£2016: £34,104) relates to discontinued operations, the Group has an improved statement of financial position at the year-end, showing net liabilities of £645,884 (2016: £1,019,656).

These results are presented under European Union Adopted International Financial Reporting Standards (“EU Adopted IFRS”).

Shaping the future

Our vision for the future places our operations in harmony, encouraging stability and stimulating revenue. We are now primed to take advantage of the potential it offers in our identified markets.

As always, thank you for your support.

Anthony Sanders

Interim Chief Executive Officer and Chairman

21 February 2018

Consolidated statement of comprehensive income for the year ended 30 September 2017

2017

2016

£

£

Revenue

24,640

37,255

Cost of sales

(1,964)

(13,856)

Gross Profit

22,676

23,399

Other operating income

-

1,738

Realised gain on disposal

1

-

Administrative expenses

(2,261,107)

(1,790,794)

(2,261,106)

(1,789,056)

Loss from operations

(2,238,430)

(1,765,657)

Net finance expense

(2,961)

(2,104)

Loss before taxation

(2,241,391)

(1,767,761)

Taxation charge

-

96,245

Loss from continuing operations

(2,241,391)

(1,671,516)

(Loss) / profit from discontinuing operations net of tax

(16,133)

4,246

Total comprehensive loss for the year

(2,257,524)

(1,667,270)

Attributable to owners of the parent

(2,257,524)

(1,667,270)

Basic and diluted loss per share (pence)

(0.20)

(0.25)

Consolidated statement of financial position at 30 September 2017

2017

2016

£

£

Non-current assets

Intangible assets

1

1

1

1

Current assets

Trade and other receivables

77,137

187,836

Cash and cash equivalents

749,972

128,462

827,109

316,298

Current liabilities

Trade and other payables

(1,179,967)

(1,201,928)

Interest bearing loans

(293,027)

(134,027)

(1,472,994)

(1,335,955)

Net (liabilities)

(645,884)

(1,019,656)

Capital and reserves attributable to

owners of the Company

Share capital

1,778,768

783,998

Share premium account

17,954,376

15,073,350

Shares to be issued

-

63,081

Share reserve

(1,250,000)

-

Merger reserve

11,119,585

11,119,585

Capital redemption reserve

2,732,904

2,732,904

Retained losses

(32,981,517)

(30,792,574)

Total Equity

(645,884)

(1,019,656)

Consolidated statement of cash flows for the year ended 30 September 2017

2017

2016

Cash flow from operating activities

£

£

Loss for the year

(2,257,524)

(1,667,270)

Adjustments for:

Amortisation of intangible assets

-

18,913

Net bank and other interest charges

2,961

2,104

Services settled by the issue of shares

45,326

45,799

Issue of share options and warrants charge

68,581

883,878

Net cash outflow before changes in working capital

(2,140,656)

(716,576)

Decrease / (increase) in trade and other receivables

110,700

(124,358)

(Decrease) / increase in trade and other payables

(20,793)

(572,523)

Cash outflow from operations

(2,050,749)

(1,413,457)

Interest received

14

19

Interest paid

(1,475)

(623)

Net cash flows from operating activities

(2,052,210)

(1,414,061)

Financing activities

Issue of ordinary share capital

2,516,220

1,424,028

Repayment of loan

(155,000)

(65,000)

New loans raised

312,500

91,000

Net cash flows from financing activities

2,673,720

1,450,028

Net increase in cash

621,510

35,967

Cash and cash equivalents at the beginning of year

128,462

92,495

Cash and cash equivalents at end of year

749,972

128,462

Consolidated statement of changes in equity for the year ended 30 September 2017

Share Captial

Share Premium

Shares to be issued

Other Reserves

Retained Earnings

Total Equity

£

£

£

£

£

£

Balance at 30 Sept 2015

592,096

13,395,669

502,848

13,852,489

(30,049,182)

(1,706,090)

Loss for the year

-

-

-

-

(1,667,270)

(1,667,270)

Cash received in advance of share issue

-

-

68,081

-

-

63,081

Contingent consideration written off

-

-

(40,000)

-

40,000

-

Shares issued

191,912

1,667,681

(462,848)

-

-

1,406,745

Share options

-

-

-

-

883,878

883,878

Balance at 30 Sept 2016

783,998

15,073,350

63,081

13,852,489

(30,792,574)

(1,019,656)

Loss for the year

-

-

-

-

(2,257,524)

(2,257,524)

Shares issued

994,770

2,881,026

(63,081)

(1,250,000)

-

2,562,715

Share options

-

-

-

-

68,581

68,581

Balance at 30 Sept 2017

1,778,768

17,954,376

-

12,602,489

(32,981,517)

(645,884)

Notes to the financial information

1. Basis of preparation

Milestone Group Plc is a company registered and resident in England and Wales.

The financial information set out in this announcement does not constitute the Group's statutory accounts, as defined in Section 435 of the Companies Act 2006, for the years ended 30 September 2017 or 30 September 2016, but is derived from the 2017 Annual Report. Statutory accounts for 2016 have been delivered to the Registrar of Companies and those of 2017 will be delivered in due course.

The consolidated statement of comprehensive income, consolidated statement of financial position, consolidated cash flow, consolidated statement of changes in equity (above) and associated notes are extracts from the financial statements and do not constitute the Group's statutory accounts.

Statutory accounts for the year to 30 September 2016 and 30 September 2017 have been reported on by the Independent Auditors.

The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ("EU Adopted IFRSs").

The Independent Auditor's Report on the Annual Report and Financial Statements for 2016 and for 2017 was unqualified, but did draw attention to matters by way of emphasis relating to the basis of preparation, which is reproduced below and was substantively similar for both years.

In forming the Auditor's opinion on the financial statements, which is not modified, the Auditor's have considered the adequacy of the disclosure made in note 1 to the financial statements concerning the Group's ability to continue as a going concern. “The going concern status of the Group is dependent upon the management of the timing of settlement of its liabilities and the raising of further funds in the immediate to short term and thereafter on the forecast profitability of new strategic partnerships and joint ventures which have recently commenced and for which the degree of success cannot yet be reliably demonstrated.

Forecasts prepared by management indicate that if they are unable to manage the Group’s liabilities as planned or the external fundraising does not occur in the immediate term and, subsequently, the future projects do not prove as profitable as forecast the Group would have an immediate requirement to seek alternative sources of funding. As stated in note 1, these conditions indicate that a material uncertainty exists which casts significant doubt on the Group’s ability to continue as a going concern.”

The basis of preparation is reproduced below.

Going Concern

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman’s statement and below. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial statements. In addition, note 16 to the financial statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and exposures to credit risk and liquidity risk.

The net liability position as at 30 September 2017, being the Group’s financial year-end, was £645,884 (2016: £1,019,656). Subsequent to the reporting date, the Board has been able to agree funding in the form of further share issues raising £150,000 in cash through the exercising of certain warrants. The funding received to date will go part way to cover year-end liabilities, and the Company will be dependent upon future funding and revenues to meet the remaining obligations, as discussed below.

The Company continues to be reliant upon its continuing ability to manage the timing of settlement both of its current liabilities and future liabilities as they arise. There is also a need for successful on-going equity fundraises and / or loans in the immediate to short term thereafter, while sales plans and projections come into effect, especially in relation to revenues generated from new strategic partnerships and joint ventures. The Board has prepared forecasts to reflect the revenues expected to be generated by the Group and partnerships. The Company is fully focused on ensuring that sales plans are followed to ensure that the business becomes self-sustaining in the near future.

The Directors have concluded that the need to generate future funds from further fundraising and from trading activities to satisfy the settlement of its on-going and future liabilities represents a material uncertainty, which may cast significant doubt upon the Group’s and the Company’s ability to continue as a going concern. Nevertheless, after making enquiries and considering this uncertainty and the measures that can be taken to mitigate the uncertainty, the Directors have a reasonable expectation that the Group and the Company will have adequate resources to continue in existence for the foreseeable future. For these reasons they continue to adopt the going concern basis in preparing the annual report and accounts. The financial statements do not include any adjustments that would result if the Group and Company was unable to continue as a going concern.

2. Loss per share

The calculation of the basic loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The calculation of diluted loss per share is based on the basic loss per share, adjusted to allow for the issue of shares and the post tax effect of dividends and interest, on the assumed conversion of all other dilutive options and other potential ordinary shares.

There were 163,213,116 share options and 248,431,460 share warrants outstanding at the year-end (2016: 174,189,116 and 110,931,460). However, the figures for 2017 and 2016 have not been adjusted to reflect conversion of these share options, as the effects would be anti-dilutive.

2017

2016

Loss £

Weighted average number of shares

Per share amount Pence

Loss £

Weighted average number of shares

Per share amount Pence

Basic and diluted per share attributable to shareholders

(2,257,524)

1,115,347,198

(0.20)

(1,667,270)

653,810,227

(0.25)

3. Posting of Accounts

The Report and Accounts of Milestone Group Plc, including the Notice of Annual General Meeting will be posted to shareholders shortly.